Hermès - Registration Document 2016

OVERVIEW OF THE GROUP

RISK FACTORS

1.8.3 INSURANCE POLICY The Hermès Group’s policy regarding insurance is to transfer any expo- sure that is liable to produce amaterial impact on profits to the insurance market. The Group insurance programmes represent most of the insu- rance coverage for the subsidiaries. They are placed via the intermediary of brokers who are amongst the ten largest French brokers and with first-rate insurance companies. The main international insurance pro- grammes favour an “all risks except” approach and cover: 1) property damage and operating losses that may affect production sites, logistics centres, distribution centres or premises in France and in other countries. The policy underwritten by FM Global was renewed for a one-year term. The upper cover limit is €500 million. The deductibles for direct damage vary from €15,000 to €250,000 and from €70,000 to three days’ gross profit for operating losses. In Japan, the Group has had an earthquake insurance policy for several years covering €40 million in direct damage and operating losses. This insurance coverage is supplemented by a prevention/ engineering programme and prevention inspections were carried out at 67 production and distribution sites in 2016. The recommenda- tions issued are monitored using a stringent, formally documented system; 2) civil liability for damages to persons, property and intangibles caused to third parties in the conduct of business operations or by products. These policies were taken out for three years at 1 January 2016 with AIG Europe and Zurich Insurance for cover amounts which take into account the nature of the Group’s operations; the maximum cover per event is €70 million, and the deductibles vary from €1,000 to €10,000; 3) the transport of products between the production sites and to the distribution network. A policy has been taken out with Chubb; 4) responsibilities in relation to the environment. This policy was renewed with AIG Europe on 1 January 2015 for a period of 24 mon- ths. The coverage limit is €7.5 million per claim and €15 million for the period, and the deductible thresholds are €25,000; 5) cyber risks. Like each year since 1 January 2013, the policy with Zurich Insurance was renewed for a period of one year, covering the reconstruction of data, operating losses following a security incident, civil liability, and costs, notably defence and notification costs. Other contracts had been subscribed to fulfil specific requirements, par- ticularly in the context of building operations (new work or renovation) carried out as project managers. In 2016, these policies were not the subject of significant claims.

gement andmonitoring rules. Administrativemanagement and operatio- nal control are ensured by theMiddle & Back Office department, notably via the use of integrated cash flow software. Furthermore, the audit and risk management department (A&RMD) oversees proper compliance with risk monitoring and management procedures. On a monthly basis, the Treasury Security Committee ascertains that these procedures have been followed and that any risks identified have been addressed. The Group follows a conservative investment policy, designed to avoid the risk of capital loss and maintain liquidity in order to be able to implement rapid and independent strategic changes. The Group deals with leading banks and financial institutions only. In addition, counterparty risks on financial transactions are monitored on an ongoing basis by Hermès International’s Treasury Management department. Most available cash is invested for the short term, mainly in money-market mutual funds offered by leading financial institutions and indeposit certificates issuedby top-ratedbanks, with very lowsensitivity. The treasury management department constantly monitors changes in legal regulations with regard to investment and derivative transactions to ensure that the Group conforms to current regulations. Furthermore, the finance department adjusts its procedures and tools on an ongoing basis to accommodate changes in its environment.

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2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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